Trading Rhythm — Five Key Words for Achieving Practical Success

In practice, we often experience missed opportunities, false starts, being trapped, or taking losses—trading pain follows us like a shadow. Fundamentally, all these issues stem from trading rhythm. Once the rhythm is disrupted, the mindset collapses, and trading enters a vicious cycle, leaving traders like they’re standing at the edge of a deep abyss, falling into hell. So, how does the problem of trading rhythm arise? [Taogu Ba]

The so-called rhythm refers to regular fluctuations of activity—knowing when to move and when to pause, cycling repeatedly, day after day. Spring, summer, autumn, winter; day and night; all things in existence and the evolution of heaven and earth follow cyclical patterns and rules defined by space and time. Behind trading rhythm are cycles, laws, spacetime, and rules. Individual stock cycles, thematic cycles, sentiment cycles, index cycles, industry cycles, macroeconomic cycles—all evolve through a process of incubation, initiation, development, climax, divergence, retreat, and extinction. This process is defined by spacetime, with each phase exhibiting distinct characteristics. Understanding the entire market involves grasping the process, laws, features, and boundaries of these cycles, and trading strategies are responses based on a clear understanding of these rules. The difficulty in mastering trading rhythm lies in the fact that cycle changes are not simple linear relationships. Multiple cycles often overlap, intersect, compete, and coexist, creating complex relationships with blurred boundaries. Coupled with unpredictable human emotions and insatiable desires, traders are caught in the middle—breaking the cycle requires insight and breakthroughs. Therefore, improvement is needed in the following areas:

First, small cycles obey larger cycles. A stock’s cycle follows the thematic cycle, which follows the sentiment cycle, which follows the index cycle (bull market), which in turn follows the economic cycle. When a stock starts to rise, its thematic direction has already begun to diverge. As it climbs, the theme recedes, leading to divergence and inevitable underperformance. Chasing high at this point is clearly unwise. A main theme can drive market sentiment to a climax, while a sub-theme emerging during the main theme’s divergence usually cannot replace the main theme and tends to be short-lived. The main theme does not suddenly vanish; blindly switching is unwise. During bear markets, sentiment cycles diverge from index cycles; sentiment stocks detach from fundamentals and follow hype logic. During bull markets, sentiment cycles align with index cycles; sentiment stocks rely on fundamentals and follow value logic. Different market environments have different underlying logic and strategies. From a cycle perspective, the key to mastering trading rhythm is “going with the trend.”

The stock market is a barometer of the economy and a measure of social contradictions. Currently, internal economic contradictions manifest as “over-supply and insufficient demand,” while external contradictions are “U.S.-China rivalry and technological competition.” Internal contradictions determine survival; external contradictions determine life or death. The weight and order differ.

Second, manage expectations to control desires. Expectations relate to judgment, not prediction. Is a theme a one-day wonder or capable of lasting a month or even a year? Can a stock double, or reach a three-wave or five-wave high? Forecasting market movements in time and space is an eternal theme in trading. The size of a theme cycle depends on the magnitude of the social-economic contradictions it reflects, its imagination and influence, and the sustained stimulation from policies and news. Any stock aiming for a 3-5x rise must be based on a larger cycle’s thematic attributes.

Therefore, from an expectation management perspective, the key to trading rhythm is “aligning with the big players.” Only the major cycle qualifies as the “main line,” and only the leading big player within that main line can sail freely across the sea. Your desires can only be fulfilled when aligned with the leading core or stronghold of the main line. Any subjective wishful thinking beyond this is a deadly risk.

Third, timing determines strategy. Timing refers to choosing the cycle level or the specific phase within a cycle. In macro terms, trend strategies are optimal in a bull market; sentiment cycle strategies are best in a bear market; often, both overlap in a bull market and separate in a bear market. Pure sentiment cycle strategies suggest: incubation is suitable for accumulation, initiation for explosive points, development for following, climax for inertia, divergence for low positions, and retreat for theme switching. But how long should incubation last? Can explosive points be caught at initiation? Will development phases see the weak give way to the strong? Can profits be taken at the peak? Who will be the strongest in divergence? Which direction to switch during retreat? Answering these questions is core to response. From a strategic perspective, the key to mastering trading rhythm is “being half a beat slow.”

If you notice the main force building positions, it’s wise to wait before entering. Generally, the oscillation and shakeout phases require at least five waves, with a maximum of nine. The breakout price often moves upward; to avoid false breakouts, it’s best to confirm volume and price action before acting. During development, weak stocks give way to strong ones; fierce competition among peers begins. After the peak, it’s uncertain whether it’s a top for distribution or a healthy divergence—only after the fact will it be clear. On a micro level, a sub-theme with a small cycle often starts and peaks quickly, then retreats and disappears. The only response at this stage is to follow the explosive point and exit the next day. Missing the explosive move and chasing high the next day often results in being trapped. Timing must match strategy; smooth rhythm depends on proper alignment. Mismatch leads to chaos.

Fourth, only trade with certainty. The essence of the market is full of uncertainty, but “certainty trading” refers to high-probability setups. How do high-probability trades come about? First, through correct review; second, through sufficient trading volume. The purpose of review is to improve understanding—not just knowing what happens, but why it happens: why prices surge, why certain stocks become strong, why they hit limit down, and why they rebound afterward. Why didn’t I rise after buying? Why did my sell order skyrocket? Is it technical or cognitive? Is success due to skill or luck? Daily review answers these “hundreds of thousands of why’s,” and practical trading is about applying these answers. Correct answers lead to positive feedback; mistakes lead to traps. Over time, positive feedback increases, negative feedback decreases, and trading patterns become clearer, forming a consistent mode.

This “trading mode” is essentially a set of rules and conditions—an answer formula. These rules come from the validation of cognition and practice. From the perspective of rhythm control, the key is “adhering to rules.” Adhering to rules means only trading within the pattern, because within the pattern, boundaries are clearer, increasing the probability of certainty. Ambiguous trades often disrupt rhythm—either because they’re outside the pattern or because the pattern itself isn’t refined enough.

Fifth, always seize the initiative in trading. Generally, if you can buy without obligation, don’t buy; if you can sell without obligation, do sell—that’s proactive trading. Wanting to sell and buy back later, or buy and then sell immediately, is reactive trading. This isn’t just wordplay. In practice, impulsive orders, luck-based decisions, and not letting go of small profits are major reasons for passive trading. Emotions and desires easily breach trading boundaries because greed and fear break psychological thresholds. For example, losing 10% but holding a position with 80% unrealized profit versus 1% profit—psychologically, the impact is vastly different. The former might encourage holding, the latter might prompt cutting losses. To avoid being driven by emotion, the key is “not seeking perfection.” “Not seeking perfection” means reducing trades, only operating within the pattern, abandoning ambiguous setups; not fully deploying positions, keeping flexible holdings; not chasing last-minute gains, avoiding the final copper coin; and cutting losses promptly. Cut losses decisively, never hold onto losing positions, and abandon luck-based thinking. “Not seeking perfection” is about peace of mind—trading becomes a pleasure when operating within a comfortable zone. Seeking contentment in trading—“knowing when to stop”—ensures longevity and peace of mind.